The rise of networked computing environments such as the Internet is rapidly changing the way that modern businesses market and sell their goods and/or services to buyers. Conventional business transactions, as practiced in the nonelectronic, non-networked world, may be imitated and in some instances improved by utilizing these cutting edge technologies. Because the Internet is global in scope, and further because electronic information is easier and less expensive to store, transmit and analyze than paper-based information, the Internet provides a unique opportunity for buyers and suppliers (e.g. sellers, etc.) to reach each other using novel approaches.
One such approach that has gained popularity in recent years is the electronic auction. Auctions over electronic networks have the potential to address large numbers of buyers by posting auction items (descriptions of goods and/or services) traditionally available only to those in the vicinity of the auction or to those who actively seek out the auction in some other manner. By vastly increasing the number of potential buyers with little or no marginal increase in the costs of administering the auction, a supplier increases both the chances that a sale will be made as well as the likelihood that favorable sales terms will be realized.
In a similar manner, reverse auctions work to maximize a buyer's returns. In a reverse auction, buyers post the names and/or descriptions of products or services that they wish to purchase from one of a select group of suppliers. The suppliers bid against each other, using successively lower bids, in order to gain the opportunity to provide the buyer with the product or service. In the reverse auction system, the supplier with the lowest bid after a certain portion of time traditionally wins the right to supply the buyer with the product or service for that price. Reverse auctions allow buyers to obtain excellent prices on goods and services while minimizing the amount of comparison shopping necessary to obtain such prices. Reverse auctions may also benefit suppliers in that they can acquire information about the pricing, terms and/or other conditions utilized by their competitors.
By connecting buyers and suppliers directly with each other, the Internet is eliminating the “middleman” that is present in normal businesses, thereby working to maximize returns for both buyers and suppliers. However, there is still much work to be done to optimize the reverse auction experience.